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Merchants To Have Fewer Credit Card Restrictions

The U.S. Department of Justice announced yesterday that it has filed suit against credit card companies Visa, Mastercard and American Express over what it calls “anti-competitive practices” relating to the credit card companies’ restrictions on merchants’ ability to offer discounts to users of cards they prefer to accept.

Proposed settlements have already been reached by the DOJ with Visa and Mastercard that will have those two companies agreeing to allow merchants to offer customers discounts or rebates for using the cards that they prefer to accept (such as debit cards, which usually have lower merchant fees). American Express has vowed to fight the suit.

The ability to incentivize their customers to use preferred cards will be an important win for small businesses when the settlements with Visa and Mastercard are finalized. Credit card acceptance fees can be a major expense for both retail and wholesale businesses, and until now businesses have had little leverage in the fight to minimize those costs.

We are a small online retail store, and we pay close to 5% of every transaction in the credit card collection fees. It’s a minimum of $0.30 per transaction just to do the transaction, and then an additional 3% of the total dollar charged on top of that….which averages to about 5%. When a customer makes a purchase of less than $5, it normally costs us more to do the transaction than we get in sales profit….but we don’t want to put a “minimum purchase” to the customers, as I know that upsets them as well. So we absorb the loss in the hopes that the customer will have a happy interaction with us and continue to shop with us.